What is Risk Classification?
Risk Classification The process of categorizing insurance applicants into homogeneous risk groups to enable equitable premium pricing and adequate pooling of risk.
Source: CFA Institute, IFRS Foundation, FASB (GAAP), Basel III Framework
How is “Risk Classification” Used in Practice?
Accurate risk classification helps insurers set fair premiums and maintain solvency by grouping similar risks together.
Certification Exam Relevance
Who Needs to Know This Term?
- Financial Analysts
- Bankers
- Traders
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What is Risk Classification?
The process of categorizing insurance applicants into homogeneous risk groups to enable equitable premium pricing and adequate pooling of risk.
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